Clearing  Houses 
and  Currency 


No.  1 


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CLEARING  HOUSES 
AND  CURRENCY 

No.  1 


BY 

JAMES  G.  CANNON 

PRESIDENT  FOURTH  NATIONAL  BANK,  NEW  YORK 


Address  Delivered  at  the 

ANNUAL  BANQUET  OF  THE  CHAMBER  OF  COMMERCE 

Syracuse,  N.  Y.,  March  27,  1913 


THE  TROW  PRESS 
NEW  YORK 


CLEARING  HOUSES 
AND  CURRENCY 

No.  1 

Gentlemen: 

It  affords  me  very  great  pleasure  to  be  present 
and  speak  to  the  members  of  the  Syracuse 
Chamber  of  Commerce  on  this  occasion.  It  is 
difficult  to  estimate  the  return  a  community 
derives  either  as  direct  or  collateral  benefits 
from  an  organization  such  as  your  Chamber  of 
Commerce.  Direct  benefit,  as  a  rule,  is  trace¬ 
able  and  I  should  say  that  much  of  the  com¬ 
mercial  development  of  Syracuse  can  be  credited 
to  your  efforts.  The  collateral  benefit,  while  no 
less  important,  is  just  as  essential  to  the  wel¬ 
fare  of  a  city  as  the  more  visible  results.  It  is, 
in  reality,  the  business  atmosphere,  and  you  can¬ 
not  help  but  appreciate  how  much  more  can  be 
accomplished  where  there  is  a  spirit  of  healthy 
co-operation  than  where  petty  business  jeal- 
ousies  are  to  be  contended  with.  Chambers  of 
Commerce  and  business  organizations  of  a 


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Clearing  Houses  and  Currency 


kindred  nature,  operating  on  broad  and  liberal 
lines,  are  deserving  of  the  undivided  support  of 
all  classes  of  citizens.  I  am  glad  to  have  the 
opportunity  to  congratulate  you  on  the  evi¬ 
dence  of  the  friendly  spirit  you  have  shown 
here  to-night,  and  I  trust  that  the  material 
welfare  and  commercial  standing  of  your  city 
will  always  be  your  first  thought. 

I  am  going  to  speak  to  you  this  evening  on 
the  subject  of  Clearing  Houses.  Very  little 
attention  has  ever  been  paid  to  these  institu¬ 
tions  outside  of  the  immediate  banking  circles 
which  have  been  connected  with  them,  but 
latterly  more  attention  has  been  given  to  their 
facilities  and  there  has  been  a  growing  feeling 
on  the  part  of  the  business  interests  that  they 
can  be  utilized  along  broader  lines  in  helping  to 
solve  our  currency  problem. 

The  Clearing  House  has  become  a  powerful 
factor  in  the  financial  life  of  this  country. 
From  small  beginnings,  used  simply  as  a  device 
for  exchanging  checks  between  banks,  it  has 
become  a  great  machine  through  the  combina¬ 
tion  of  banks  in  each  association  for  upholding 
and  strengthening  the  integrity  of  our  financial 
institutions;  and  as  its  members  have  seen  from 
time  to  time  what  can  be  accomplished  through 


Clearing  Houses  and  Currency 


7 


its  agency  they  have  delegated  to  it  more  and 
more  powers;  and  whatever  may  be  said  as  to 
the  exercise  of  these  powers,  it  still  behooves  us 
to  stop  and  consider  how  far  such  powers  can 
continue  to  be  delegated  to  these  various  asso¬ 
ciations  without  becoming  oppressive  to  the 
banks  which  are  its  members. 

A  general  discussion  of  these  powers  has  been 
brought  before  the  business  community  at  the 
present  time,  largely  on  account  of  the  activity 
of  the  so-called  Pujo  Committee,  and  it  has 
been  suggested  by  this  Committee  that  these 
associations  should  be  incorporated.  Opinion 
seems  to  be  divided  among  the  bankers  of  the 
country  as  to  the  wisdom  of  this  move.  I  have 
for  a  long  time,  after  careful  study  of  the  situa¬ 
tion,  felt  that  they  should  be  incorporated,  and 
in  an  address  delivered  at  Columbia  University, 
shortly  after  the  panic  of  1907,  I  suggested  the 
incorporation  of  Clearing  Houses,  and  in  my 
testimony  before  the  Pujo  Committee  I  also 
favored  such  incorporation.  It  has  seemed  to 
me  that  if  Clearing  Houses  are  ever  to  form  the 
nucleus  of  a  comprehensive  currency  system,  in 
this  country,  as  some  of  us  believe  to  be  possi¬ 
ble,  one  of  the  first  requisites  is  adequate  pro¬ 
vision  for  their  incorporation. 


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Clearing  Houses  and  Currency 


As  we  all  know,  public  sentiment  has  changed 
very  decidedly  during  the  past  ten  years  with 
respect  to  matters  of  this  character,  and  during 
the  past  decade  all  of  our  public  service  corpora¬ 
tions  have  been  carefully  supervised  by  public 
service  commissions  and  our  railroads  by  the 
Interstate  Commerce  Commission,  and  I  think  it 
is  the  consensus  of  opinion  that  this  has  been  for 
the  public  good.  It  is  now  becoming  the  order  of 
the  day  that  when  any  body  of  men  exercise  power 
which  affects  the  public  at  large,  or  any  great 
portion  of  the  public,  that  power  or  authority, 
although  ostensibly  private,  is  nevertheless  im¬ 
pressed  with  public  character,  and,  therefore, 
should  be  subject  to  governmental  regulation, 
irrespective  of  the  manner  in  which  it  may  have 
been  administered  in  the  past,  and  as  this  seems 
to  be  the  generally  accepted  status  of  affairs  in 
the  United  States  to-day,  I  am  sure  the  Clear¬ 
ing  Houses  of  this  country  sooner  or  later  will 
of  necessity  be  obliged  to  recognize  it  and  either 
submit  to  incorporation  under  a  general  law  of 
the  Federal  Government  or  become  incorpo¬ 
rated  under  various  State  laws.  When  incor¬ 
porated  they  can  be  held  responsible  for  their 
acts  and  be  subject  to  such  provisions  as  the 
law  may  delegate  to  them. 

I  do  not  believe  the  extent  to  which  many 


Clearing  Houses  and  Currency 


0 


associations  have  carried  their  rules  and  regu¬ 
lations  along  lines  which,  to  say  the  least,  are 
very  restrictive  among  their  members  in  doing 
business,  is  generally  known.  In  one  large  city  in 
Pennsylvania,  rules  are  enforced  which  prohibit 
the  solicitation  of  accounts  of  other  members,  and 
members  having  depositors  of  other  member 
banks  shall  have  the  right  to  ascertain  from  such 
members  the  extent  and  character  of  loans 
made  to  such  depositors,  and  when  a  depositor 
applies  to  one  member  bank,  that  bank  shall 
have  the  right  to  ascertain  from  the  depositor’s 
bank  whether  a  loan  has  previously  been  offered 
there  and  refused,  and  the  reason  for  its  refusal. 
In  this  way  the  depositor  would  actually  be 
barred  from  closing  his  account  with  one  bank 
and  going  with  another. 

In  one  large  southern  city  very  stringent 
rules  have  been  made  with  reference  to  the 
banks  of  the  association  allowing  rebates  of 
interest  on  loans  paid  before  maturity,  and  a 
fixed  rate  is  established  which  must  be  strictly 
adhered  to  in  such  case.  This  is  done  in  several 
Clearing  Houses  of  the  country. 

In  many  Clearing  Houses  they  have  rules  cov¬ 
ering  the  methods  of  advertising  of  the  different 
banks,  and  in  one  large  city  all  printed  adver- 


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Clearing  Houses  and  Currency 


tising  by  the  members  is  restricted  to  daily 
newspapers  and  to  circulars  intended  for  dis¬ 
tribution.  And  in  another  city  the  Clearing 
House  has  an  advertising  committee  to  which 
is  referred  all  contracts  for  advertising  by 
members. 

In  a  Pennsylvania  city  the  associated  banks 
report  to  each  other  the  names  of  persons  whose 
accounts  have  been  closed,  due  to  overdrawing 
or  for  any  other  reason,  and  the  president  or 
cashier,  on  the  day  the  account  is  closed,  sends 
a  slip  containing  the  names  and  addresses  to  all 
the  other  banks  in  the  city.  This  provision  is 
in  force  in  several  of  our  large  Clearing  House 
Associations. 

In  a  large  western  city  every  bank  member  of 
the  association  compels  its  depositors  to  sign  an 
agreement  that  they  will  not  hold  the  bank  re¬ 
sponsible  for  any  check  cashed  or  deposited 
until  the  returns  are  fully  received. 

In  another  large  western  city  a  daily  meet¬ 
ing  of  the  committee  is  held  to  fix  the  buying 
rate  for  exchange  received  from  customers  in 
amounts  of  $10,000  and  upward. 

In  a  large  southern  city  no  member  of  the 
association,  or  bank  or  trust  company  clearing 
through  a  member,  can  accept  on  deposit  or 


Clearing  Houses  and  Currency 


11 


for  collection  from  local  customers  items  drawn 
against  local  banks  or  trust  companies  not 
members  of  the  association,  thus  barring  out 
all  competition. 

In  several  cities  rules  and  regulations  are 
established  which  prohibit  the  giving  away  of 
check  books,  and  the  rates  which  the  banks 
must  charge  for  the  same  are  carefully  super¬ 
vised. 

In  thirty-one  cities,  mostly  large,  the  regu¬ 
lation  rate  of  interest  that  shall  be  paid  on 
deposits  is  fixed  by  the  Clearing  House  Associa¬ 
tion,  and  in  several  cities  the  rates  of  interest 
that  shall  be  charged  upon  loans  by  the  asso¬ 
ciated  banks  are  fixed.  The  Clearing  House 
Association  appoints  a  committee  who  from 
time  to  time  names  the  minimum  rate. 

One  large  Clearing  House  Association  in  the 
West  was  the  recipient  of  special  attention  by 
the  Pujo  Committee,  in  its  recent  investiga¬ 
tion,  practically  all  of  its  active  officers  having 
been  subjected  to  rigorous  examination  upon 
its  rule  that  members  should  not  be  permitted 
to  pay  interest  on  checking  accounts,  except 
those  already  on  their  books,  which  was  believed 
to  be  directed  against  a  new  bank.  The  bank 
in  question  refused  to  subscribe  to  the  new  rul- 


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Clearing  Houses  and  Currency 


ing,  claiming  it  would  hamper  its  growth,  and 
being  uncertain  of  their  power  to  enforce  ex¬ 
pulsion,  the  other  members  withdrew  and  formed 
a  new  association. 

Among  the  other  notable  Clearing  House  reg¬ 
ulations  are  the  fixing  of  the  premium  or  dis¬ 
count  to  be  paid  or  received  on  exchange, 
regulating  the  cost  of  transfers  by  wire,  and  in 
most  cities  the  Clearing  House  defines  the 
minimum  amount  of  capital  and  surplus  a  bank 
must  have  to  be  eligible  for  membership. 

And  last,  but  not  least,  in  ninety-one  cities 
the  Clearing  Houses  have  established  rates  for 
the  collection  of  out-of-town  checks  and  the 
fixing  of  penalties  for  the  non-compliance  with 
such  rates. 

Many  other  associations  have  established 
rules  and  regulations  in  regard  to  Clearing 
House  examiners. 

I  could  go  on  for  some  time,  but  I  do  not 
desire  to  weary  you  by  giving  details  as  to  the 
methods  which  are  being  pursued  by  some  of 
the  two  hundred  and  thirty  associations  in  this 
country.  I  have  taken  the  liberty  of  citing 
only  a  few  examples  of  what  is  being  done  by 
Clearing  House  Associations  so  that  you  may 
see  that  there  is  some  foundation  for  the  sug- 


Clearing  Houses  and  Currency 


13 


gestion  that  these  associations  should  be  incor¬ 
porated  and  made  responsible  for  their  acts. 

While  there  is  a  large  field  for  expansion  in 
the  activities  of  Clearing  Houses,  and  while  it 
may  be  that  in  some  of  the  instances  I  have 
cited  this  expansion  has  been  beneficial,  never¬ 
theless,  in  other  cases  in  which  the  associations 
have  gone  to  great  lengths  in  the  regulation  of 
the  business  of  their  members,  this  represents 
an  abuse  of  the  Clearing  House  system.  The 
point  I  seek  to  make  is  that  these  and  other 
extensions  of  Clearing  House  activities,  whether 
good  or  bad  in  themselves,  involve  a  dangerous 
exercise  of  power,  unless  the  whole  system  is 
brought  under  proper  governmental  regulation. 
By  the  undue  exercise  of  power,  many  of  the 
associations  have  undoubtedly  laid  themselves 
open  to  criticism.  They  will  probably  have  to 
relinquish  a  good  many  of  these  regulations  in 
the  event  of  the  Government  establishing,  as  I 
sincerely  trust  it  will,  a  Federal  Incorporation 
Law  for  Clearing  Houses. 

For  some  time  I  have  been  of  the  opinion 
that  all  banks  should  be  admitted  to  member¬ 
ship  in  the  associations,  irrespective  of  the  size 
of  their  capital,  provided  their  management 
and  loaning  system  were  sound,  and  there  is 


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Clearing  Houses  and  Currency 


no  good  reason  why  small  institutions,  as  well 
as  large,  should  not  have  the  facilities  of  the 
Clearing  House.  It  is  also  a  source  of  great 
expense  to  all  banking  institutions  to  collect 
checks  and  drafts  on  outside  banks,  not  mem¬ 
bers  of  any  given  association,  and  I  believe 
some  plan  can  be  formulated  which  will  permit 
institutions  of  small  capital,  but  with  ample 
means  for  the  amount  of  business  they  do,  to  be¬ 
come  members.  Perhaps  some  scheme  for  a  sliding 
scale  of  capital  and  surplus  might  be  applied  so 
that  it  will  be  necessary  only  for  institutions  that 
desire  to  clear  to  have  a  proper  amount  of  capital 
and  surplus  in  proportion  to  their  deposits. 

These  and  many  other  matters  could  be  cov¬ 
ered  by  a  proper  act  of  incorporation.  My  own 
preference,  if  it  could  be  legally  done,  would  be 
for  a  Federal  Incorporation  Act,  something  after 
the  order  of  the  National  Bank  Act.  If  this 
could  be  accomplished,  Clearing  Houses  could, 
perhaps,  classify  under  the  head  of  Central 
Reserve  and  Reserve  City  Clearing  Houses, 
with  powers  delegated  to  each  one  of  these 
classes.  My  thought  would  be  to  make  them1 
come  under  the  jurisdiction  of  the  Secretary  of 
the  Treasury,  rather  than  of  the  Comptroller  of 
the  Currency,  because  of  the  fact  that  the  mem- 


Clearing  Houses  and  Currency 


15 


bership  of  these  associations  consists  of  State 
institutions,  as  well  as  institutions  incorporated 
under  the  National  Bank  Act. 

In  most  associations  the  Clearing  House  Com¬ 
mittee,  sometimes  called  the  Committee  of 
Management,  or  Executive  Committee,  is  elected 
annually  and  is  vested  with  almost  absolute 
power,  the  direction,  practically,  of  the  whole 
machinery  of  the  Clearing  House  resting  in  its 
hands.  This  committee  consists  of  from  three 
to  five  men,  presidents  of  the  strongest  institu¬ 
tions  of  a  given  city.  The  personnel  is  usually 
changed  from  year  to  year,  but  in  most  large 
cities  this  committee  revolves  in  a  few  hands; 
and  where  Clearing  House  examiners  are  em¬ 
ployed  it  is  almost  impossible  for  the  members 
of  this  committee  not  to  know,  through  this 
examiner,  pretty  much  the  condition,  methods, 
and  business  of  all  their  competitors.  While 
the  men  who  have  composed  these  committees 
in  the  various  Clearing  Houses  of  the  country 
for  many  years  have  been  men  of  high  character 
and  standing,  and  have  exercised  the  powers 
conferred  upon  them  in  a  discreet  manner,  still 
I  would  favor  the  appointment  for  life  or  for  a 
long  tenure  of  office  of  a  paid  president  of  the 
association  in  several  of  the  large  cities  like  New 


16 


Clearing  Houses  and  Currency 


York,  Chicago,  St.  Louis,  Boston,  Philadelphia 
and  others,  who  should  be  a  banker  of  national 
reputation,  and  draw  a  salary  equal  to  that  of  any 
bank  president.  He  should  not  engage  in  the 
banking  business,  but  should  devote  all  of  his  time 
to  the  duties  of  his  office.  In  this  way  many 
things  could  be  accomplished  which  cannot  now 
be  done  in  serving  the  interests  of  the  members 
of  the  association  and  preserving  the  integrity 
and  competition  of  the  individual  bank. 

I  am  firmly  of  the  belief,  and  have  been  for 
several  years,  that  in  the  Clearing  House  Asso¬ 
ciations  of  our  country  we  have  facilities  which 
can  be  utilized  as  a  safe  basis  upon  which  we 
may  issue  currency.  In  common  with  many 
others,  I  endorsed  the  so-called  Aldrich  Bill,  but 
it  has  become  more  and  more  apparent  that 
this  bill  cannot  be  enacted  into  law,  and  we 
naturally  turn  to  the  next  best  thing,  namely,  to 
utilize  the  existing  machinery  of  the  banking 
business  which  has  been  tried,  and  see  if  by 
careful  analysis  we  cannot,  from  these  present 
beginnings,  which  have  served  us  so  well,  build 
up  a  monetary  scheme  which  will  serve  the  peo¬ 
ple  of  this  country  as  a  whole  without  respect 
to  location  or  environment.  If  the  countrv 
does  not  seem  ripe  for  a  wholesale  turnover  in 


Clearing  Houses  and  Currency 


17 


our  monetary  system,  why  not  do  what  is  to 
be  done  gradually?  I  believe  our  present  ad¬ 
ministration  has  a  great  opportunity  to  accom¬ 
plish  a  lasting  good  along  this  line  for  the 
American  people. 

There  is  a  prejudice  of  long  standing,  which, 
happily,  is  growing  less  and  less,  against  our 
banks,  and  the  people  at  large  are  now  coming 
to  believe  that  the  bankers  of  the  nation  are 
their  friends  and  not  their  enemies.  This  old 
prejudice  was  due  to  the  fact  that  banks  for¬ 
merly  charged  high  rates  for  the  use  of  money, 
and  kept  them  at  a  distance.  I  think  our 
bankers  are  beginning  to  realize  that  they  have 
been  largely  at  fault  in  this  matter,  and  they  are 
now  taking  the  people  more  and  more  into 
their  confidence  in  matters  of  finance.  This  is 
the  day  of  the  open  door  in  banking,  and  the 
business  of  discounting  a  customer’s  note  is  not 
held  behind  closed  doors,  but  the  customer  now 
comes  to  the  bank  as  a  matter  of  right,  because 
of  certain  obligations  to  him  on  the  part  of  the 
bank.  He  presents  a  detailed  statement  of  his 
affairs  to  the  institution  with  which  he  deals, 
and  on  the  strength  of  his  financial  condition 
revealed  therein,  and  of  the  balances  main¬ 
tained,  he  secures  from  the  bank  the  amount 


18 


Clearing  Houses  and  Currency 


of  accommodation  which  he  himself  recognizes 
as  being  just  and  proper  according  to  estab¬ 
lished  standards.  The  banking  business  is  in 
this  way  becoming  better  known  to  the  public 
at  large,  and  men  are  not  afraid  of  committing 
their  affairs  to  their  bank  because  of  their  com¬ 
petitors.  This  is  the  era  of  publicity — of  com¬ 
petition  in  trade. 

The  bankers  of  this  country  have  been  largely 
to  blame  for  lack  of  currency  reform  because 
they  could  not,  and  cannot  now,  agree  among 
themselves  as  to  the  best  method  to  be  pursued. 
The  time  is  ripe,  it  seems  to  me,  when  we  should 
agree  upon  some  simple  foundation  and  then 
build  our  system  of  finances  upon  it,  and  that 
foundation,  I  believe,  we  have  in  the  various 
Clearing  House  Associations  of  the  country.  I 
feel  that  an  elastic  currency,  designed  to  meet 
the  requirements  of  our  trade,  can  be  devised 
by  availing  ourselves  of  the  machinery  of  our 
Clearing  House  Associations. 

In  the  panic  of  1907,  the  maximum  amount 
of  Clearing  House  Loan  Certificates,  Cashier’s 
Checks,  and  other  substitutes  for  money  issued, 
as  far  as  known — and  I  have  attempted  to 
gather  these  statistics  very  carefully — was  $236,- 
189,000  which,  after  the  panic,  were  all  retired 


Clearing  Houses  and  Currency 


19 


without  the  loss  of  a  single  dollar  to  the  banks 
or  to  the  public.  Of  this  maximum  amount, 
$84,420,000  were  outstanding  in  New  York; 
$38,285,000  in  Chicago;  $10,578,000  in  St. 
Louis — a  total  of  $137,283,000,  or  58%  of  the 
whole  having  been  contributed  by  the  three 
present  Central  Reserve  Cities. 

The  Reserve  Cities,  forty-seven  in  number, 
had  a  maximum  amount  of  $88,496,000,  or 
37^2%  of  the  whole;  so  that  the  Central  Re¬ 
serve  and  Reserve  Cities  issued  95^%  of  the 
entire  amount  of  these  so-called  Emergency 
Certificates.  If  we  look  at  it  in  another  form 
and  take  simply  the  Sub-Treasury  cities,  nine 
in  number,  consisting  of  New  York,  Baltimore, 
Cincinnati,  Boston,  New  Orleans,  St.  Louis, 
Philadelphia,  Chicago,  and  San  Francisco,  these 
cities  issued  about  78%  of  the  amount  out¬ 
standing. 

I  am  giving  you  these  figures  to  show  that  if 
the  Clearing  Houses  either  of  the  Central  Re¬ 
serve  Cities  and  Reserve  Cities,  or  simply  the 
Clearing  Houses  in  cities  where  there  are  Sub- 
Treasuries,  could  be  properly  incorporated  and 
privileges  given  to  them  in  connection  with  the 
issue  of  an  elastic  currency  suitable  to  the  trade 
and  commerce  of  the  country,  bearing  a  high 


20 


Clearing  Houses  and  Currency 


rate  of  interest  while  the  same  was  outstanding, 
and  retirable  by  deposit  of  lawful  money  in  the 
Treasury  of  the  United  States,  the  same  as 
National  Bank  Notes  are  now  retired,  we  would 
then  have  the  machinery  established  for  hand¬ 
ling  an  asset  currency  which  would  be  available 
in  all  parts  of  the  country.  If  these  associa¬ 
tions  could  then  be  federated  in  some  way  so 
that  the  actual  cash  reserve  which  is  held  in 
one  association  would  not  be  drawn  out  by 
another  association  and  a  scramble  for  cash  be 
made  in  times  of  stress,  and  by  combining  them 
under  some  governmental  supervision  and  power 
whereby  the  reserves  of  the  various  associations 
could  be  massed,  I  believe  we  would  have  the 
beginning  of  a  strong  financial  system  in  this 
country.  From  time  to  time  methods  could  be 
evolved  for  the  retirement  of  National  Bank 
Notes  based  upon  Government  bonds  and  other 
of  the  reforms  which  are  so  needful  could  be 
carried  out. 

The  thought  which  I  have  just  outlined,  in  a 
general  way,  would  create  elasticity  in  the  assets 
of  the  banks  in  the  various  associations.  In 
times  of  financial  stress  and  special  activity, 
what  the  banks  require  are  assets  which  are 
readily  convertible  into  cash  and  which  will 


Clearing  Houses  and  Currency 


21 


pay  depositors  as  well  as  afford  a  basis  for  new 
loans.  At  such  times  we  need  expansion  in  the 
right  direction,  and  not  contraction.  We  do  not 
need  more  fixed  currency,  but  we  do  need  flexi¬ 
bility.  In  times  of  panic  or  extremely  tight 
money,  the  banks  require  some  means  by  which 
they  can  convert  their  fixed  assets  into  liquid 
assets  without  calling  upon  borrowers  for  the 
payment  of  their  loans,  and  with  these  new 
liquid  assets  furnish  further  credit  to  their  cus¬ 
tomers,  because  in  such  times  the  needs  of  the 
occasional,  as  well  as  other  borrowers  upon  the 
banks,  are  very  large. 

The  purpose  of  the  Clearing  House  Loan  Cer¬ 
tificates,  which  were  used  so  extensively  in  the 
panic  of  1907,  was  to  allow  the  banks  to  take  to 
the  Clearing  House  their  fixed  assets  and  to 
convert  them  into  a  medium  of  exchange  be¬ 
tween  themselves,  thus  allowing  the  extension 
of  further  credit,  which  credit  was  utilized  by 
their  depositors  through  the  Clearing  House. 

Panic  always  produces  fright,  not  only  among 
the  public  at  large,  but  also  among  the  banks 
themselves,  and  if  we  could  have  a  provision  for 
the  issuance  of  an  asset  currency,  through  a 
modification  of  the  Clearing  House  system, 
and  properly  authorized  under  Government 


22 


Clearing  Houses  and  Currency 


supervision,  it  would  go  a  long  way  toward 
allaying  the  fear  which  occurs  at  such  periods 
and  would,  to  a  great  extent,  prevent  these 
periodical  disturbances  in  our  financial  world. 

It  is  not  my  desire  to  appear  a  pessimist  with 
respect  to  the  immediate  future  of  this  great 
country  of  ours,  but  I  do  feel  very  strongly  that 
something  should  be  done,  and  done  at  once, 
looking  to  the  reform  of  our  currency.  The  money 
markets  of  the  world  are  very  firm,  and  the  de¬ 
mands  upon  capital  for  several  years  are  going  to 
be  greater  than  ever  before.  A  large  amount  of 
the  world’s  funds  have  for  some  time  been  in  the 
process  of  conversion  into  fixed  capital,  such  as 
railroads,  buildings  of  unprecedented  size,  public 
service  utilities,  the  Panama  Canal,  conservation 
and  irrigation  schemes,  and  other  things  of  like 
character,  not  only  in  this  country,  but  throughout 
the  civilized  world.  Another  feature  of  the  situ¬ 
ation  is  the  disturbance  of  the  financial  equilib¬ 
rium  which  has  been  brought  about  by  the 
extraordinary  absorption  of  gold  by  India.  It 
behooves  us,  therefore,  in  view  of  the  large  de¬ 
mands  for  credit  which  are  staring  us  in  the  face 
from  all  directions,  to  so  adjust  our  currency 
conditions  in  this  country  that  we  will  be  in  a 
position  to  meet  any  exigencies  that  may  arise, 
without  disturbing  our  prosperity,  and  I  earnestly 


Clearing  Houses  and  Currency 


23 


hope  our  present  administration  will  see  the 
necessity  for  promptly  finding  some  solution  of 
our  currency  problem. 


. 


